From shoeboxes to shareholders:

🕔Sep 23, 2009

Mrs. Mallory’s corset may seem an unconventional foundation for a story about credit unions, but in northern BC foundations are often built on unusual things.

This story starts in the 1940s when Mrs. Mallory, a member of the brand new Queen Charlotte Islands Central Credit Union based in Port Clements, was flipping through the Eaton’s catalogue. She found a suitable garment for eight dollars but she only had two dollars in savings, so she contacted her neighbours on the loans committee.

At the time, the idea for a local cooperative financial institution was very new. After the Depression islanders were used to making do, but some realized that with a little help they could get ahead.

“Nobody had any money. They thought if they all took their money and put it together in one place, one person could borrow $5 or $50 and go and get something. But with the five cents they had in their pocket, they couldn’t gain anything,” says Eric Ross of Queen Charlotte.

In those cash-strapped days, borrowing was not a natural urge. A man struggling to support his family might just as soon wait the year or two it took to save up for a rowboat rather than face a loan officer and interest charges at a far-away bank. But the burgeoning credit union movement, which Mr. Ross watched grow from shoebox beginnings into the multi-million dollar Northern Savings Credit Union of today, had to encourage borrowing to maintain viability.

Loan leeway
Thanks to Mrs. Mallory’s transaction, the credit union’s money started to move—and islanders have been well supported ever since, says Doug Richardson, one of early presidents of the QCI Central branch. Later, a system of graduated interest rates—which decrease as loans get bigger—was introduced, too.

After that, things started changing for working people on the islands. Loggers were able to get loans to buy equipment rather than being indebted to timber companies for supplies; fishermen were able to buy boats and pay them off after the catch was brought in, and neighbours were able to help invest in each other’s houses, businesses and more.

“People weren’t afraid to borrow money anymore,” says Mr. Richardson, whose family has owned a ranch in Tlell since 1919 and has borrowed money for anything from trucks to farm equipment.
The best part, he said, was the leeway local credit unions had when it came to approving loans. British Columbia’s Credit Union Act had only been in place since 1937 and many of the regulations hadn’t been written, nor were there any government regulators breathing down the necks of those in charge. A person’s name alone was worth a substantial amount of money in those days, says Richardson. As for collateral, the local boards were willing to get creative.

For example, if someone were sick and had to travel for treatment, the loans committee would mull it over and come up with a solution. “They would come up with the strangest collateral you ever saw in your life. Like an old outboard motor,” says Mr. Richardson. “We made the rules so we could stretch them if we had to,” he said. As a reward, the QCI Central Credit Union never had an unpaid loan or lost a dime.

“One young man tried to run off on his loan,” said Mr. Richardson. He packed up all the assets he’d used as security and shipped off on the next boat. But the Credit Union directors discovered he was from Terrace, so they contacted his family and business people there and everyone helped out.

“Everything was cash on the nail over there for him, until he paid off that loan,” he said.

They had other close calls, like the fellow in Port Clements who’d used an overgrown lot outside of town as collateral to get money to build a hotel. “He got into trouble and we carried him and carried him and carried him until he got turned around and finally paid it back.”

Small-town advantages
Unlike the big banks, where loans officers were moved around every couple of years and wouldn’t get to know the community, the islands’ credit union directors were willing to take risks because they knew each other so well.

The early credit unions, one in Queen Charlotte, one in Port Clements and one in Masset, relied heavily on volunteer commitment from boards. The offices were originally run out of people’s homes, and the daily records—along with cash—were passed from secretary to secretary in a shoebox.

Mr. Ross remembers the early days of the Skidegate Inlet Credit Union based out of Queen Charlotte. When it grew too big for shoeboxes, an office was set up, with regular hours, at Mrs. Roberts’ house on the waterfront.

Very little cash circulated around the islands in those days. Both Mr. Ross and Mr. Richardson remember how men would come in to town from the logging camps with their pay-cheques. At Chapman’s Store in Port Clements, a fellow might buy his groceries and throw a $100 cheque on the counter. If Chapman had cash, he’d dole it out, but otherwise he’d make up the remainder of the value with smaller cheques he had in the till. The same thing would happen to Mr. Ross with his taxi business. He’d be given a $100 cheque for a $25 ride from Juskatla into town. The man would sign the back of the cheque and Mr. Ross would hand him $75 in change. Some of the cheques wouldn’t have room for another signature. Then they’d finally be sent to the bank so the last person could be paid.

Mainland merger
By the mid-1960s, the three independent credit unions on the islands had reached the stage where they needed to help each other out. The Skidegate Inlet office had a half million in assets, but not quite enough clout to offer more enhanced services. QCI Central had around $300,000 and Masset’s credit union was under government supervision.

The island groups all looked toward Prince Rupert, where the Kaien Consumers Credit Union was doing well. Mr. Ross was president of Skidegate Inlet while the negotiations took place, and in 1968 all three credit unions voted to join with Kaien, which later became known as Northern Savings.

Over the years, the credit union system has opened up financial doors for people who may not have had access to them before. Not only was financial capital through loans and mortgages available, but the credit union offered health and life insurance to people who were working in inherently dangerous jobs, like forestry and fishing too.

More recently, Northern Savings has made efforts to reach out to First Nation villages, whose residents have not traditionally been involved with the credit union movement.

The lack of private land in the reserve system means many villagers don’t have the collateral needed for a loan. Northern Savings overcame that by setting up a unique agreement with Canadian Mortgage and Housing Corporation and the band councils, who guaranteed their members’ loans. Villagers could then borrow money to make improvements to their homes.

Although competition among lending institutions is higher today, Mr. Ross is confident the credit union system will always provide a strong base for rural people, especially on Haida Gwaii.
“It’s the only real banking system we’ve got. As far as I’m concerned, the others are here today, gone tomorrow.”